NFO Nest - April 2009

NFO Nest
(April 2009)

Debt funds dive undau(e)nted…

Since the start of 2009, 18 mutual funds have filed offer documents with the Securities and Exchange Board of India. Out of these, 10 of them are debt oriented. But all are not conventional liquid funds, interval funds or fixed maturity plans - there are indeed interesting offers — Tata PSU Bond Fund, Tata Triple Ace Fund and DBS Chola Select Income Fund - Flexi Debt and Regular Debt Plans, to name a few. The NFOs this month - the Gold Fund and the Target return Fund - are, in fact, disguised “debt” funds. A common vein runs through them all – a strong focus on safety and risk aversion.

The following funds find their place in the NFO Nest in April, 2009.

SBI Gold Exchange Traded Fund
Opens: 30 March, 2009 Closes: 28 April, 2009

Given the uncertainties in the global economic environment, gold as an asset class offers an excellent hedge. Gold ETF is the most efficient way of owning this asset. It is an interesting option to enhance portfolio diversification. SBI Gold Exchange Traded Fund aims at investing 90% to 100% in gold and gold bullion and 0% to 10% in debt and money market instruments. This passively managed open ended mutual fund scheme would invest in gold and endeavour to track the price of gold. The investment objective of this gold ETF is to seek to provide returns that closely correspond to returns provided by the price of gold through investment in physical gold. However, the performance of the scheme may differ from that of the underlying asset due to tracking error. The scheme will be benchmarked against the price of gold, based on the prices given by London Bullion Market association (the morning fixing). Each unit of this scheme will be approximately equal to the closing price of one gram of gold on the date of allotment. The units of this scheme will be listed on the NSE. The entry load for applications for up to Rs 25 lakh is 2.50 per cent, for Rs 25 lakh-Rs 50 lakh 1.50 per cent, for Rs 50 lakh-one crore one per cent and for applications above one crore there is no entry load. Post listing, investors have the option of exiting the scheme at prevailing NAV without any exit load.

ICICI Prudential Target Returns Fund
Opens: 15 April, 2009 Closes: 14 May, 2009

ICICI Prudential Target Return Fund seeks to generate capital appreciation by investing in equity or equity related securities of large market capitalization companies constituting the BSE 100 index and providing investors with options to withdraw their investment automatically based on triggers for preset levels of return as and when they are achieved. The fund will invest 65-100% in equity and equity related securities with medium to high-risk profile. It will invest up to 35% of the total assets in debt and money market instruments with low to medium risk. The investments in ADR/GDR can be up to 50% of allocation to equity & equity related securities. The fund may invest up to 75% of its net assets in derivatives. The benchmark index for the fund is BSE 100 Index and Sanjay Parekh will be the fund manager.

The Fund aims at aiding investors in automating their profit bookings, thereby, imparting the much needed safety in times of uncertainty. In this fund, gains made above a certain trigger percentage – 12%, 20%, 50% or 100% - automatically get redeemed from the fund and is switched over to a fixed income fund (one of the four pre-selected eligible debt schemes). Protection of returns with reasonable gains seems to be the USP of the fund. This can be achieved through self-discipline and attention a rare trait in investors…These triggers are an additional facility and not a part of the fund itself. However, as the name may suggest, there is no guarantee or assurance of returns in the fund. But the fund is aimed at enhancing the potential holding period returns of investors by taking emotion out of investing.

IDFC Investment Advisors, the asset management company of IDFC Mutual Fund has launched Rs 5 billion portfolio fund - IDFC Hybrid Infrastructure Portfolio (HIP). The fund will aim at investing money in the equities of companies involved in infrastructure activities for a span of 4-5 years and is expecting returns in the range of 35%. This fund is particularly designed for High Networth Individuals. Mid-size infrastructure companies tend to do well in a bear market and the fund will invest in such companies. The fund will also target investments in private equity deals and in private investments in the public enterprises space and 75% of the corpus will be invested in the unlisted space, though the company would keep itself away from projects with long gestation periods, unlike the conventional private equity deals. The company has mopped up about Rs 2.50 billion under HIP in the last one month, and expects to raise another Rs 2.50 billion from a group of high net worth individuals (HNIs) over the next few months.

SHINSEI PSU Bond Fund, Kotak Gold Fund, Sundaram Paribas Gold Plus and Religare Credit Opportunities Fund are expected to be launched in the coming months.